Zoltek to Challenge $36M Jury Verdict

St. Louis Business Journal – Copyright 2006 American City Business Journals
By Rick Desloge

A jury in U.S. District Court in St. Louis awarded $36 million Wednesday to Structural Polymer Group Ltd. in a breach of contract suit against Zoltek Cos. Inc.

In addition, U.S. District Judge Carol Jackson is considering an order that would require Zoltek to provide carbon fiber to Structural Polymer from 2007 to 2010, said Ed Dowd Jr., an attorney with Dowd & Bennett in Clayton.

Dowd and his partner, Jim Bennett, worked with attorneys from Bryan Cave, led by Louis Bonacorsi, in representing Structural Polymer, a British company that is a subsidiary of Gurit Holding AG, which is listed on the Swiss Exchange.

St. Louis-based Zoltek Cos. (Nasdaq: ZOLT), headed by Chairman and Chief Executive Zsolt Rumy, said in a statement that it will challenge the verdicts. “Although the outcome of this litigation is inherently uncertain, Zoltek believes it has strong legal grounds to overturn these verdicts and will file post-trial motions challenging the jury’s verdicts in several fundamental respects,” the statement said.

James Martin and James Virtel of Armstrong Teasdale represented Zoltek in the case.

Structural Polymer brought its suit in February 2005, saying Zoltek had breached a supply agreement to provide large-filament carbon fiber, an essential component of the composite products Structural Polymer produces for its customers, which use the products to make wind turbine blades and materials used in marine applications, according to the company’s lawsuit.

Structural Polymer said in its suit that under the agreement, reached Nov. 6, 2000, Zoltek was to supply a large amount of carbon fiber filament to Structural Polymer through 2010. Zoltek was to be the exclusive supplier of the large-filament carbon fibers, according the suit, but “by July 2004, Zoltek admitted to being overwhelmed by (Structural Polymer’s) requests even though the requests were within the quantity permitted in the supply agreement.” Structural Polymer’s suit also said Zoltek was soliciting orders from new customers when it knew the new orders would prevent it from fulfilling its obligations to Structural Polymer.

Structural Polymer said that starting in August 2004, Zoltek had not supplied the material, which prevented Structural Polymer from meeting its customer needs. The suit said Structural Polymer will continue to suffer irreparable harm, including loss of business from current and prospective customers, unless Zoltek performs its obligations under the supply agreement.

Zoltek specializes in producing carbon fiber, a strong, lightweight building material that is found in sporting goods equipment such as bicycles, tennis racquets and golf clubs and also has applications in the auto, construction and aerospace industries. The company reopened its Abilene, Texas, plant last year to capitalize on additional demand for carbon fiber. The business also operates a plant in Hungary.

Results for the company’s fiscal year ended Sept. 30 have not yet been released. Zoltek reported a loss of $40.4 million for fiscal 2005.

Zoltek’s stock closed up $1.55 per share Wednesday at $24.24 per share.

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